Is IIPR A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think Innovative Industrial Properties, Inc. (NYSE:IIPR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is IIPR a good stock to buy now? Innovative Industrial Properties, Inc. (NYSE:IIPR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. Our calculations also showed that IIPR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare IIPR to other stocks including National Health Investors Inc (NYSE:NHI), Coherent, Inc. (NASDAQ:COHR), and Hecla Mining Company (NYSE:HL) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Innovative Industrial Properties, Inc. (NYSE:IIPR).

Do Hedge Funds Think IIPR Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in IIPR over the last 21 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is IIPR A Good Stock To Buy?

More specifically, Zimmer Partners was the largest shareholder of Innovative Industrial Properties, Inc. (NYSE:IIPR), with a stake worth $111.7 million reported as of the end of September. Trailing Zimmer Partners was D E Shaw, which amassed a stake valued at $37.9 million. Waterfront Capital Partners, Millennium Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Innovative Industrial Properties, Inc. (NYSE:IIPR), around 2.81% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 1.73 percent of its 13F equity portfolio to IIPR.

Since Innovative Industrial Properties, Inc. (NYSE:IIPR) has faced bearish sentiment from hedge fund managers, logic holds that there is a sect of hedge funds who sold off their full holdings by the end of the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising close to $15.7 million in stock, and Matthew L Pinz’s Pinz Capital was right behind this move, as the fund dropped about $2.3 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Innovative Industrial Properties, Inc. (NYSE:IIPR). We will take a look at National Health Investors Inc (NYSE:NHI), Coherent, Inc. (NASDAQ:COHR), Hecla Mining Company (NYSE:HL), ALLETE Inc (NYSE:ALE), Energizer Holdings, Inc. (NYSE:ENR), Viavi Solutions Inc (NASDAQ:VIAV), and LCI Industries (NYSE:LCII). This group of stocks’ market caps are closest to IIPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NHI 12 54916 -3
COHR 29 163652 -3
HL 17 43194 4
ALE 20 79507 -5
ENR 28 221150 3
VIAV 29 328204 -2
LCII 25 113779 7
Average 22.9 143486 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $236 million in IIPR’s case. Coherent, Inc. (NASDAQ:COHR) is the most popular stock in this table. On the other hand National Health Investors Inc (NYSE:NHI) is the least popular one with only 12 bullish hedge fund positions. Innovative Industrial Properties, Inc. (NYSE:IIPR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IIPR is 58.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on IIPR as the stock returned 35.9% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.